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By George P. Brockway, originally published November 28, 1988

1988-11-28 Reality and Welfare Reform title

1988-11-28 Reality and Welfare Reform Daniel Patrick Moynihan

THE GIVEAWAY of Senator Daniel Patrick Moynihan’s new Family Security Act -aka welfare reform – is its cost. I don’t mean that the cost is to be given away; I mean that the low cost betrays the modest ambitions of the bill.

The estimated expenditure is $3.34 billion over five years. That’s $668 million a year, which may seem like a lot of money to you, but works out to $20.62 – exactly twenty dollars and sixty-two cents –  for every man, woman and child living in poverty in the United States of America.

Yes, I know that the plan isn’t intended to do anything about poverty, isn’t meant to help the working poor, isn’t supposed to shelter the homeless or nourish the ill-fed, has nothing to do with improving or expanding medical services. In fact, one of its charms for the radical Right is that it is expected to reduce expenditures for public housing, Food Stamps, Medicaid and Aid to Families with Dependent Children (AFDC). So let’s look at it this way: $668 million is 0.00015 – or 15 thousandths of 1 per cent-of the current GNP. Or this way: It’s about a third of the projected cost of the additional space shuttle they’re building.

I’m sorry, but I’ve overstated the case a bit, for the $3.34 billion includes a “workfare” provision that will cost $900 million. This is one feature of the bill insisted on by President Reagan and feverish-eyed Republicans like Senator Orrin G. Hatch of Utah. Everyone else, including more liberal (if they don’t mind my using the word) Republican governors who will have to administer it, apparently hopes to repeal the provision either because of its negative cost effectiveness or because of its meanness. If that $900 million is deducted from the total, we have $2.44 billion left, or $488 million a year for everything the bill promises to do. The summaries given the press naturally accent the positive. They emphasize that a real effort is going to be made to force fathers to share in the support of their offspring. No one (except the fathers) can object to that, especially since it may persuade some to stay home with their families and thus prove rewarding all around.

The summaries further emphasize education (not the same as workfare). You can’t object to that, either. We’ve heard about our illiteracy rate and our inability to do simple arithmetic and our ignorance of our government and of history. We know businessmen complain that they have to weary themselves with excessive interviews to find competent workers. And so on. It’s hard, therefore, to be against more education. It’s also hard to imagine that the puny budget will make much of a dent in the problem.

For my part, I become depressed when I hear vocational education touted as a panacea. We must train these people to be punctual, we are told, and to work diligently and not goof off. Does anyone suppose they don’t know all that? It’s no secret. They’ve heard it all before, but they haven’t seen much good come of it.

Few experiences can be more disillusioning and dispiriting than undergoing training for the kinds of jobs that don’t exist. Perhaps my long memory misleads me here, yet I recall the junior high school shop where I learned to solder Western Union splices and to thread separate black and white wires through clay pipes set in the joists and studs of a mocked-up house. I was astonished when, in the real world, I saw my first BX cable, and I remain skeptical of that sort of job training unless it is done on the job. I have had occasion to observe a couple of for-profit training schools in operation, too, and I really don’t think the answer is privatization.

The solution is jobs. We’ve seen the solution in action – but again my long memory probably misleads me, for hardly a man seems to be alive who remembers the famous days and years of the New Deal. Everyone else knows that the New Deal failed. It taxed and taxed, and spent and spent, and elected and elected, and still, in 1939, on the eve of World War II, the unemployment rate was 17.2 per cent.

As I have previously quoted Disraeli, there are lies, damned lies, and statistics; and I have yet to meet even a professor of economic history who is aware of how that 17.2 per cent lies. So I’ll tell you. It counts all the millions who worked for the CCC, NYA, WPA, and the rest of the so-called alphabet-soup agencies as unemployed. Now, the millions who worked for those agencies in fact worked and in fact produced goods for the common wealth, and were in fact paid for it. They built thousands of schools, libraries, post offices, hospitals, and dams; restored thousands of acres of forests; paved thousands of miles of highways and sidewalks; helped bring electricity to the farms; made a start on public housing; painted pictures; produced plays and concerts; published a set of state guidebooks that is still unequaled; and gave courses in every subject imaginable. If that was unemployment, we could stand a bit more of it. Nor would it be unbearable to have urban streets swept and suburban leaves raked.

Everyone knows, of course, that this was impossibly expensive and wasteful. Yes, the last budget of Herbert Hoover’s Presidency (fiscal year 1933) was only $2.8 billion in deficit. And what was the last prewar New Deal deficit? $3.1 billion; ten per cent larger. To be sure, $300 million was a lot more in those days than it is at present. But the point is that enabling millions of people to contribute to the common weal and to maintain their self-respect cost only 10 per cent more than doing nothing. Which approach was the really wasteful one?  Moreover, our wartime experience demonstrates that the so-called First New Deal would have been a lot more successful if it had spent more, not less.

1988-11-28 Reality and Welfare Reform Men Working

INSTEAD of the creative programs of the New Deal, the new scheme has its workfare, something Ronald Reagan wishes to be remembered for. He deserves to get his wish. The requirement is that by 1994, one parent in every two-parent family (an institution the bill is supposed to be encouraging) that receives benefits must be made to work at least 16 hours a week in what is grandly known as the Community Work Experience Program. What will they be paid for this work? Zero. Well, you know, beggars can’t be choosers.

Since this provision does not take effect until 1994, it is a fair guess that New York’s Democratic Senator Moynihan, among others, intends to try to repeal it after the Great Veto Threatener leaves the White House. This is a judgment call with which I beg to differ. It brings to mind Moynihan’s first attempt at welfare reform which came when he was Richard M. Nixon’s Domestic Affairs Adviser. The attempt was defeated by a combination of conservatives opposed to any form of welfare and liberals led by the late George Wiley of the National Welfare Rights Organization, who pointed out that the proposed benefits were lower than those then in effect.

I had the pleasure and privilege of knowing George Wiley, who was a wise and humorous and dedicated man. He was well aware of Voltaire‘s dictum that the best is the enemy of the good, and he understood perfectly the argument that the benefits could be improved once the law was in place. He simply doubted that the improvements would ever come. The record supports his judgment. Over the past several years, for example, AFDC payments have lost a good third of their value because of inflation. The Pentagon gets budget boosts on top of generous estimates of inflation, but I’ve not noticed any rush to rectify the AFDC situation. As for the workfare amendment, it has already, in this Democratic Senate, survived by a 41-54 vote an attempt to table (and so defeat) it.

Workfare should not be confused with what the sponsors of the Family Security Act consider its heart and sinews: JOBS (for Job Opportunities and Basic Skills. The republic would collapse without silly acronyms).The laudable aim of this program is to get people off the welfare rolls and into regular employment where they can be self-supporting and self-respecting. As I’ve said, I’m dubious about the training being offered. Anyway, after training the welfare recipients are supposed to get to work, and I don’t at all object to that. The regulations covering JOBS are moderately complicated, and some of them are not nice; but I want to talk about something more fundamental.

We are told that the unemployment rate has now fallen to 5.2 per cent. Everyone knows this figure is too low, but I’m not going to quarrel with it – at least not here and now. I’m merely going to note that currently received economic doctrine, taught in practically all colleges and universities in the land, and I am sure accepted as gospel by large majorities  of both houses of Congress, holds that full employment actually means 6 per cent unemployment. If unemployment really falls any lower than that, the economy is expected to overheat, and we’ll have inflation. (I’m not aware that we have been without inflation since World War II, except for one year in President Harry S. Truman’s second term, and one year in President Dwight D. Eisenhower‘s; so let’s just say that we’ll have even more inflation.)

Indeed, the newspapers and the airways are full of ominous questions right now: Will the Federal Reserve Board raise the interest rate again to head inflation off at the pass? Will that send the stock market into a tizzy? Will it abort our slowly recovering foreign trade? Will it make it harder to reduce the deficit? Will it make the mortgage rate so high that home ownership becomes an impossible dream even for two-earner Yuppies? Anyone who believes that mainstream economists know what they’re talking about will answer all those questions in the affirmative.

Where does that leave us? It leaves us with a JOBS program that is a mirage or a hoax. Assuming we believe the unemployment figures, we already have too many people working for our own good. Even if the JOBS training program should succeed beyond all rational expectations, even if the trainees could then be successful in finding work that would not (one of the requirements) displace anyone already working, we would have to head them off at the pass. We couldn’t afford to have so few people unemployed.

I AM NOT making any of this up. If you have merely glanced at journalistic reports of the thoughts of our mainstream economists, you may think that when they talk about 6 per cent of the work force being unemployable, they are saying all those millions are too little educated, too stupid, too sick, or too pregnant. That’s not exactly what they mean. They do classify many people under those headings, but they mean something else as well. They are speaking of friction in the economy – that is, time lost while workers are between jobs. Again there’s misunderstanding (and some of the economists even misunderstand themselves), for they make it sound as though there are several million people out there whimsically flitting from job to welfare to another job for no good reason. No doubt some such free spirits exist, and they will always be good for Presidential anecdotes; but the real friction results from business coming and going. It’s known as free enterprise.

In 1987, something more than 60,000 corporations went bankrupt. Most of the bankruptcies were very small. Nevertheless, they totaled over $36 billion. That ain’t hay, and it accounts for a couple of million people thrown out of work.

Then there are all the “efficient” mergers, which are efficient because they fire people. There is all the seasonal unemployment – clerks and warehousemen let go after the Christmas rush, farm workers between seasons, people laid off in model changeovers. There are all the customers’ men dropped after a market crash, and all those who lose their jobs when business temporarily slows, and those whose jobs disappear when their companies relocate for tax reasons – or in search of cheaper labor.

The foregoing account for the 6 per cent friction in the economy. The friction is not the fault of the workers; it is the fault of the system and its ethics. And the system is not a fact of nature; it is our creation. We created it in the image of mainstream economics, and the result is not altogether pretty.

The thing about mainstream economics is that it starts with the price system as given. The price system is not simply what the stickers read in the supermarkets or how the bidding goes in the grain pit in Chicago. It includes all prices, interest rates, rents – the works – and particularly and especially wage and salary scales. Mainstream economics assumes that the way the rewards of the economy are distributed is none of its business.

Our present price system will be relatively stable so long as there are 6 per cent unemployed or underemployed. This is not quite like Marx’ industrial reserve army, because the important point is that these people must be drastically under rewarded, whether they work or not, and that the next 10-15 per cent above them can’t be treated much better (the average income of the bottom quintile of our families is below the poverty level).

Under our present price system, anything substantial you do for those at the bottom has to cause inflation. Other things can cause inflation, too, but really helping the poor is sure to do so. The only noninflationary way of helping the poor entails fundamentally changing the price system, specifically and dramatically narrowing the chasm between rich and poor. For the past 15 years we have been passing by on the other side (see The Golden Mean,” NL, November 2, 1987), and it will take a whole lot more than JOBS, as well as something a whole lot different, to change direction.

The New Leader

Originally published March 23, 1987

I’VE BEEN reading a document called “Economic Justice for All.” It is the pastoral “letter” (a small book, actually) approved last fall by a vote of 225 to 9 by the National Conference of Catholic Bishops.

I hasten to put on the record that I am not now and never have been a member of the Catholic Church. I admit that, once upon a time when the world was young and I was 12, I was received as a member by the State Street Congregational Church of Portland, Maine; and I recognize that there is a sense in which all of us in the West are Christians, just as we all are also Jews, Greeks, Romans, and Visigoths. But as to theology, it’s been a long time since I was even agnostic.

So I approached the bishops’ letter warily. I would not have approached it at all if it hadn’t been attacked by George Will, William E. Simon, and William F. Buckley Jr. Anything hated by these people can’t be all bad. And, in fact, I found it a fascinating document. Let me quote:

  • “Every economic decision and institution must be judged in the light of whether it protects or undermines the dignity of the human person.”
  • “All people have a right to participate in the economic life of society …. For it is through employment that most individuals and families meet their material needs, exercise their talents and have an opportunity to contribute to the larger community.”
  • “We cannot separate what we believe from how we act in the marketplace and the broader community, for this is where we make our primary contribution to economic justice.”
  • “In some industries the mobility of capital and technology makes wages the main variable in the cost of production. Overseas competitors with the same technology but with wage rates as low as one-tenth of ours put enormous pressure on U.S. firms to cut wages, relocate abroad or close. U.S. workers and their communities should not be expected to bear these burdens alone.”
  • “The investment of human creativity and material resources in the production of weapons of war makes these economic problems even more difficult to solve.”
  • “Minimum material resources are an absolute necessity for human life. If persons are to be recognized as members of the human community, then the community has an obligation to help fulfill these basic needs unless an absolute scarcity of resources makes this strictly impossible. No such scarcity exists in the United States today.”
  • “Social justice implies that persons have an obligation to be active and productive participants in the life of society, and that society has a duty to enable them to participate in this way.”
  • “The concentration of privilege that exists today results far more from institutional relationships that distribute power and wealth inequitably than from differences in talent or lack of desire to work.”
  • “As individuals and as a nation we are called to make a fundamental ‘option for the poor.’ “
  • “The ‘option for the poor’ is not an adversarial slogan that pits one group or class against another. Rather, it states that the deprivation and powerlessness of the poor wounds the whole community.”
  • “Basic justice … recognizes the priority of policies and programs that support family life and enhance economic participation through employment and widespread ownership of property.”
  • “The economy is not a machine that operates according to its own inexorable laws, and persons are not mere objects tossed about by economic forces.”
  • “The dignity of workers also requires adequate health care, security for old age or disability, unemployment compensation, healthful working conditions, weekly rest, periodic holidays for recreation and leisure, and reasonable security against arbitrary dismissal.”
  • “We firmly oppose organized efforts, such as those now regrettably seen in this country, to break existing unions and prevent workers from organizing. Migrant agricultural workers today are particularly in need of the protection, including the right to organize and bargain collectively. U .S. labor law reform is needed to meet these problems as well as to provide more timely and effective remedies for unfair labor practices.”
  • “It is unfair to expect unions to make concessions if managers and stockholders do not make at least equal sacrifices.”
  • “Large corporations and large financial institutions have considerable power to help shape economic institutions within the United States and throughout the world. With this power goes responsibility and the need for those who manage it to be held to moral and institutional responsibility.”
  • “Business and finance have the duty to be faithful trustees of the resources at their disposal. No one can ever own capital resources absolutely or control their use without regard for others and society as a whole.”
  • “Widespread distribution of property can help avoid excessive concentration of economic and political power. For these reasons ownership should be made possible for a broad sector of our population. “
  • “Support of private ownership does not mean that anyone has the right to unlimited accumulation of wealth.”
  • “Governments must provide regulations and a system of taxation which encourage firms to preserve the environment, employ disadvantaged workers and create jobs in depressed areas. Managers and stockholders should not be torn between their responsibilities to their organizations and their responsibilities toward society as a whole.”
  • “The risk of inflationary pressures resulting from expansionary policies is very real. Our response to this risk, however, must not be to abandon the goal of full employment, but to develop effective policies that keep inflation under control.”
  • “We recommend increased support for direct job creation programs targeted on the long-term unemployed and those with special needs.”
  • “Across the nation, in every state and locality, there is ample evidence of social needs that are going unmet. Many of our parks and recreation facilities are in need of maintenance and repair. Many of the nation’s bridges and highways are in disrepair. We have a desperate need for more low-income housing. Our educational systems, day care services, senior citizens services and other community programs need to be expanded. At the same time there are 8 million Americans looking for productive and useful work.”
  • “The nation should renew its efforts to develop effective affirmative action policies that assist those who have been excluded by racial or sexual discrimination in the past.”
  • “In comparison with other industrialized nations, the United States is among the more unequal in terms of income distribution. Moreover, the gap between rich and poor in our nation has increased during the last decade.”
  • “We believe Congress should raise the minimum wage in order to restore some of the purchasing power it has lost due to inflation.”
  • “Diversity and richness in American society are lost as farm people leave the land and rural communities decay.”
  • “We continue to support a progressive land tax on farm acreage to discourage the accumulation of excessively large holdings.”
  • “We are dismayed that the United States, once the pioneer in foreign aid, is last among the 17 industrialized nations in the Organization for Economic Cooperation and Development in percentage of gross national product devoted to aid.”
  • “Rather than promoting U.S. arms sales, especially to countries that cannot afford them, we should be campaigning for an international agreement to reduce this lethal trade.”
  • “In our 1919 Program of Social Reconstruction we observed that ‘the full possibilities of increased production will not be realized as long as the majority of workers remain mere wage earners. The majority must somehow become owners, at least in part, of the instruments of production.’ “

THERE IS nothing in the passages I have quoted – and, aside from some theology, very little in the pastoral as a whole – that constant readers have not read in this space, perhaps somewhat less solemnly expressed. This is what disturbs me about the document. My instinctive response is to follow the Ben Hecht-like film writer in Boy Meets Girl who, when seconded in skulduggery by a pompous producer, responds by snarling, “Stay off of our side, B.G.”

Why do I respond in this way? Well, for one thing, the Catholic Church in America has a long record of association with illiberal causes. As prime examples, I think of the Legion of Decency (which tried to censor Faulkner, among others), the holding of Federal aid to education for ransom (until outmaneuvered by President Lyndon Johnson), and the continuing world-wide opposition to birth control. Somehow, causes like these have been enthusiastically nurtured by the Church, while liberal causes, like the astonishing 1919 call for employee ownership, have tended to be stillborn.

Then there is the issue of the separation of church and state. This issue has been raised for their purposes by Catholic laymen who disagree with the bishops. James J. Kilpatrick, writing for the Universal Press Syndicate, climaxes his diatribe with a citation (obligatory in such polemics) of Edmund Burke’s Reflections on the Revolution in France and concludes ungraciously: “The bishops know the workings of the marketplace by hearsay; they themselves, living well fed and protected lives, are as innocent as kittens of economic risk and insecurity. When they involve the church in lobbying for changes at the World Bank and the IMF, all in the name of moral instruction, they trespass upon the boundary that wisely separates the pulpit from the political arena.” Instinctively I find the argument of his final clause congenial. And yet…

And yet there is nothing in the First Amendment that forbids clergymen of whatever persuasion from speaking their minds on any matter whatever. (If you argue that churches engaging in politics should lose their tax exemptions, I counter that all churches should lose their tax exemptions.) Furthermore, for years a standard charge against the Catholic Church in Latin America was that its silence on social questions in effect supported political and economic repression.

What is truly dangerous – what absolutely corrupts the democratic process – is one-issue politics, such as the current Right-to-Life movement. “Economic Justice for All” is not a one-issue document. The public press has given it less attention that it deserves. I fear that the bishops’ parishioners, too, have passed by on the other side. They know not what they do.

 The New Leader

Originally published June 25, 1984

IN TWO mind-opening books on money (Money and the Real World and International Money and the Real World) Paul Davidson, professor of economics at Rutgers University, has occasion to use the phrase “in a world where slavery and peonage are illegal.” In both cases, he is explaining that industrial production takes time, requiring industry to plan for weeks, months or even years ahead. To be sure of adequate materials at acceptable prices, manufacturers enter into contracts with their suppliers for future delivery. The largest factor in the cost of both supplies and finished goods is the cost of labor; therefore, Davidson argues, stable labor contracts are in the interest of modern industry.

Davidson is a civilized as well as a rational man. Consequently he sees a stable labor market as one in which labor is fairly paid and decently treated. “Efficient planning … in a world where slavery and peonage are illegal,” he says, “requires contractual commitments for …  regular (non-casual) employment and fair treatment for labor over time.” This proposition will surely commend itself to other civilized and rational individuals.

Toiling in a neighboring vineyard, John Kenneth Galbraith, professor emeritus of economics at Harvard, has argued in The Affluent Society that modern industry is so productive it does not have to coerce workers (as Victorian industry perhaps had to) by keeping them in squalor and threatening them with starvation. He observes the money and effort modern business puts into advertising and selling, and concludes that the things produced must be little needed if finding buyers requires such expenditure. From this “it follows,” he explains, “that the efficiency of the process by which they are produced ceases to be an overriding consideration… Under these circumstances, the relation of the modern corporation to the people it comprises -their chance for dignity, individuality and full development of personality – may be at least as important as its efficiency …. Evidently the unions, in seeking to make life tolerable on the job, were being governed by a sound instinct. Why should life be intolerable to make things of small urgency?”

And as a matter of fact it was possible, only a few years ago, to hope that such obvious logic and reasonableness were beginning to break through the age-old barriers of greed and fear. As I noted recently in this space (“Voodoo on the Primary Trail,” NL, April 30), many labor leaders were confident of the dawn of an era of good feelings. Davidson is describing the rational actions of civilized businessmen, and Galbraith is prescribing rational actions for a civilized society. We are not, however, beneficiaries of any law guaranteeing that either businessmen or their society will be rational or civilized. There is, indeed, another way of looking at the economy that is as up-to-date as neoconservatism or neoliberalism, and is now generally accepted in the boardrooms of our great corporations. For convenience we may call it The Business Roundtable way.

This starts, as do Davidson and Galbraith, with the observations that labor is the largest single cost of production, and that we don’t need all the labor available to us in order to maintain ourselves in the style to which we have become accustomed. But The Business

Roundtable way concludes from these observations that the smart thing to do is to stabilize labor costs at the minimum, and that a whiff of unemployment is a mighty convincing stabilizer.

There is no doubt that the recent depression and the so-called recovery, with 8 million men and women still unemployed, have been deliberately stage managed accordingly.

A few quotations may dramatize the reasoning behind The Business Roundtable way: “With increasing productiveness of labor, the power of sudden expansion also grows, because the technical conditions now admit of rapid transformation into additional means of production. In all such cases, there must be the possibility of employing masses of men suddenly without injury to other spheres.”

“Industry progressively replaces skilled laborers by less skilled, mature by immature, male by female. The productiveness of labor increases the supply of labor.”

“Overwork of employed labor swells the ranks of the unemployed, while the latter, by their competition with the employed, force them to submit to harder work and lower wages.”

“Investment in the means of production and the productiveness of labor means that the labor force increases more rapidly than the need for workers.”

“Taking them as a whole, the general movements of wages are regulated by the expansion and contraction of the unemployed.”

The foregoing passages, which accurately enough represent the thinking of The Business Roundtable, are of course somewhat edited and sanitized quotations from Capital by Karl Marx. The original versions can be found in Chapter XXV – “The General Law of Capital Accumulation” -where Marx develops his notion that what he cleverly calls the industrial reserve army is necessary to the capitalist system. As a military commander uses a reserve army to exploit sudden openings or reinforce sudden weaknesses, so, Marx says, capitalists use the industrial army of the unemployed.

ONLY THE other day, as the Great Society of Lyndon Johnson unfolded under the supervision of Joseph Califano, it seemed that, like so much of Marx, the industrial reserve army was specific to the 19th century and consequently destined to be discarded in the last half of the 20th. But instead we have been discarding the Great Society, while the industrial reserve army is still with us, 8 million strong. And besides the 8 million in the domestic divisions, there are uncounted millions in the Orient and in the Third World generally.

The usefulness of this massive army that already exists lies in its very lack of organization. Its deliberate exploitation has so changed labor relations that rational analyses like Davidson’s of the need for civilized labor contracts are being brushed aside as irritatingly idealistic. Industry still needs to plan ahead, as Davidson says, and planning still depends on the availability of adequate labor at foreseeable wages. But as Marx said, and the Business Roundtable agrees, productivity is a euphemism for employing less skilled and less well-paid labor. As a result, the world-wide industrial reserve army can be expected to be mobilized to exert a steady downward pressure on wages and working conditions. If wages are falling, and potential scabs are plentiful, business has a greatly reduced incentive to contract for “regular employment and fair treatment for labor over time.” Slavery and peonage are of course illegal, but the industrial reserve army is a more convenient means to the same end. Marx recognized that, too.

It is, in truth, difficult to fault Marx on his analysis, and impossible to fault him on his passionate attack on the abuses he observed. We read with horror of Bradford, a Yorkshire worsted-mill city, where as many as 18 people – for the most part regularly employed workers – lived crowded into a single room; where in one neighborhood there were 223 houses sheltering 1,450 inhabitants, but with only 435 beds (many of them merely “an armful of shavings”) and 36 privies, or one for every 40 people. According to The Blue Guide: England, Bristol today “preserves … splendid examples of Victorian industrial architecture.” At the time those factories were built, Marx reports, Bristol was notorious for “the misery of its dwellings.” And this one chapter of Capital has 72 pages of similar details.

That we react with amazement to such accounts points to the fact that some things are better now than they were 150 years ago. That some things are better now points to the fact that Marx was mistaken in thinking his dialectics of materialism would inevitably bring his apocalyptic vision to pass. Given the nature of that vision, this is a blessing.

Nothing inevitably comes to pass, for there is nothing either good or bad but doing makes it so. What is done – or not done – is our doing. Whether we move ahead into the rational and civilized world described by Davidson and Galbraith, or fall back into the brutal and degrading world described by Marx and complacently accepted by the Business Roundtable – whichever we do, it will be our doing. We had better get on with it.

            The New Leader

Originally published April 30, 1984

 

 

 

 

 

 

            THE DEMOCRATIC Presidential primary campaign that is now drawing to a close can be counted as another of the evil consequences of the Vietnam War. For several months we have watched a candidate sincerely cultivate a liberal “image” (that awful concept), successfully appeal to many intellectuals, and at the same time vehemently attack labor unions as “special interests.”

Nothing like this could have happened before Vietnam. Before Tonkin Gulf, it went without saying that liberal intellectuals were for labor unions, and that labor unions were for liberal policies. There were exceptions, like the Teamsters, saddled with such as Jimmy Hoffa; and the building trades, bemused by racism. But in general the Democrats could count on the liberal intellectuals and organized labor. They were both concerned about the common man, and they were both members in good standing of FDR’s coalition.

With Vietnam, this changed. Aside from the few who were engaged in waging the war, the intellectuals came down pretty solidly against it. And the unions, with some exceptions, supported it. Intellectuals accused the unions of a conspiracy with the bosses to raise prices, profits and wages under the pretense of patriotism. Unionists accused intellectuals of a cowardly concern for their own skins. Antiwar marchers shouted taunting slogans; machos in hard hats beat up on the marchers. It was then, if I am not mistaken, that the term “hard hat” came into general use, and it did so as a disguised synonym for “hard head.”

Once the intellectuals began badmouthing the unions, they found much to say, especially about the alleged conspiracy with the bosses. Eventually, someone among the bosses or their publicists was struck by lightning. Whether there had been an actual conspiracy, or merely a tacit understanding, or nothing but a figment of intellectual imagination, the conspiracy theory had effectively split the intellectuals – who by now included press and TV reporters – from the labor movement. If anyone wanted to launch an antiunion offensive, his rear was protected.

With the winding down of the Vietnam War, more and more such offensives were launched. Union leaders, some of whom had prophesied an era of good feelings in boardroom negotiations (not the same thing as a conspiracy), were caught by surprise. Suddenly they had no friends outside the labor movement, while inside the movement they were faced with waning enthusiasm and declining membership.

All this had its political side. The chaotic Democratic convention of 1968 had tarred AFl-CIO President George Meany and Presidential candidate Hubert Humphrey with the same brush as Chicago’s Mayor Richard Daley, contributing to the election of Richard Nixon. The more sedate conventions of 1972, 1976 and 1980 left the unions isolated. Hence their early backing of Walter Mondale’s bid to be the 1984 Democratic standard bearer in hopes of reversing the trend.

And hence a predicament for Mondale rival Gary Hart. It must also be remembered that Hart, as George McGovern’s 1972 campaign manager, had additional reason to be cool toward the unions.

But for a Democratic candidate to attack labor unions as special interests is to adopt an ultimately self-defeating political strategy, as well as to do a considerable disservice to the American economy. An attack of this kind is self-defeating because (if successful) it splits nonmanagement workers and drives half of them into voting Republican or going fishing. It is a disservice to the economy because unions are at present the sole viable force working for a reasonably egalitarian society.

Talk about a reasonably egalitarian society sounds, I admit, pretty pompous. Yet that is simply a sign of how far we have drifted from an understanding of justice as the basis of political economy. I will say this: If justice is not the basis of political economy, the whole thing is a series of squabbles over private whims and satisfactions. As Jeremy Bentham, the father of utilitarianism, observed approvingly, “Quantity of pleasure being equal, [the game of] pushpin is as good as poetry.

Since, however, justice is the basis of political economy, no matter how frequently forgotten, it is possible to inquire into the justification for our enormous and growing gaps between the top and bottom incomes, and between the top and bottom amounts of personal wealth. Further, it is possible to argue that these should be narrowed, for reasons I hardly have space even to list. But my point is that the steady thrust of union activity, whatever else you may think about it, is toward narrowing the gaps.

Some unions are of course more successful than others. It is fashionable to contrast the relatively high wages in steel and automobiles with the much lower wages in other industries. It is, for example, shown that wages in steel and automobiles increased 137 per cent and 112 per cent, respectively, between 1972-80, while average manufacturing wages increased 104 per cent in the same period.

As I never tire of emphasizing, there are always two ways of looking at such comparisons. The Chamber of Commerce way is to see steel and auto wages as too high. The labor union way is to see the other wages as too low. As far as the mathematics is concerned, both visions are equally valid. As far as economic justice is concerned, the labor union way is surely the correct one. What we need is stronger unions in the disadvantaged industries, not attacks on all unions as “special interests.”

BESIDES BEING unhappily misoriented, Hart’s campaign has not been lacking in ironies. He has presented himself as the man of new ideas. What these ideas may be has not been much publicized – and for this the media are no doubt more to blame than the candidate. Nevertheless, I can name two.

The first is his long-standing fascination with a so-called consumption tax. After he became a conceivably successful candidate, Hart understandably muted this idea. Robert S. McIntyre, of Citizens for Tax Justice, quotes him as saying, “If anyone can think of a better title for this than ‘expenditure tax’ or ‘consumption tax,’ I would certainly welcome it.” Well, I can think of a better title: “sales tax.” It is neither a new idea nor a good one, and it leaves me speechless (almost) that anyone presenting himself as a liberal or a neo-liberal Democrat could entertain it for a minute.

Taxing consumption is, in fact, a central idea of supply-side Reaganomics and was the excuse for giving tax breaks to the rich, who were expected to save their windfalls. Fortunately they spent them instead, and their consumption expenditures (together with those of the Department of Defense) have fueled the current so-called recovery. Even the business press acknowledges that this is a consumption-led recovery, which ought to be puzzling to supply-siders, if they are capable of being puzzled. It is sufficiently shocking that Secretary of the Treasury Donald Regan, in spite of what has happened, still wants to tax consumption; it is preposterous that any Democrat should ever have toyed with the notion.

Hart’s second “new” idea is his espousal of the Atari Democrats‘ suggestion that a committee of neoclassical economists and investment bankers with time on their hands direct the reindustrializing of America. This idea is not so new, either, having been thought up by President Herbert Hoover in the form of the Reconstruction Finance Corporation something over a half century ago.

There is an even more ironical aspect to the new ideas issue. I have in my hands a document (to use a once-popular phrase) entitled, “Rebuilding America: A National Industrial Policy.” If there is anything wrong with the proposals therein, it is that they are largely indistinguishable from Hart’s “new” ideas on the same subject. The document, I hasten to say, is published by the Industrial Union Department, AFLCIO, alleged to be a special interest.

Hart’s vagueness about his positive program is unfortunate – yet understandable, given the way we run our campaigns. His innuendo-laden attack on the unions is bad. Worse than both, though, is his scorn for” old solutions” to our problems. Since he does not name what he rejects, one must suppose that the “old solutions” he has in mind are those of the New Deal and the Great Society. Thus he parrots the Ronald Reagan view of history, as he has adopted the Donald Regan view of taxation. But as John E. Schwarz shows in his recently published book, America’s Hidden Success (part of which ran in THE NEW LEADER of November 28, 1983), those “old solutions” were in fact remarkably successful and should be extended rather than abandoned.

Primary campaigns seem inevitably productive of rhetoric that is later regretted. One can desperately hope that Senator Hart’s words will be no more harmful – either to him or to Walter Mondale – than were George Bush’s words about voodoo economics.

            The New Leader

Originally published September 19, 1983

LAST MONTH (NL, August 8-22) I suggested that the world’s Less Developed Countries might be better off if we denied their manufactures (mostly produced by multinationals) unlimited access to our markets. Here I propose to look at the problem from our point of view, starting with the reiteration of some observations I made a year ago about the Atari Democrats’ notion of inventing “sunrise” industries to replace “sunset” industries lost to foreign competition.

One of my points was that whatever we devise can also be devised or copied or, it is occasionally claimed, stolen elsewhere, particularly in the Orient. I must confess my astonishment at some people’s reluctance to accept this point, which seems to me as obvious as a sore thumb-now rendered somewhat sorer by the decision of Atari itself to start moving to Hong Kong. For again and again we have lost our domestic markets to multinational competition, with the results that millions of us are out of work and that our industrial plant is operating at 70 per cent of capacity.

The New York Times ran a story recently about the Sinchu Science-Based Industrial Park, currently being developed in Taiwan. “Sinchu has all the ingredients of Silicon Valley 20 years ago,” says Irving Ho, the park’s director. That may be commercial puffery, but why not? And how could anyone fancy it might be different with the as yet uninvented sunrise industries?

In the famous peroration of The General Theory of Employment, Interest, and Money, Keynes wrote: “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.” The almost universal obeisance to the doctrine of free trade confirms this observation. Adam Smith lives, defunct though he has been these two centuries.

Adam Smith indeed lives – that is, has a place in history – and we will better understand our own place if we understand his. The first eight chapters of his Book IV [of The Wealth of Nations], where his thoughts on foreign trade are laid out, are not written in a vacuum. They are an explicit, devastating attack on the mercantile system and especially on Thomas Mun‘s England’s Treasure by Forraign Trade, the leading exposition of that system.

Foreign trade, as Smith saw it, served two purposes: it enabled countries to exchange surpluses, and it facilitated the division of labor by expanding the market. In furtherance of these ends he opposed the monopolies and bounties and other restraints on, or inducements to, trade that were root and branch of the mercantile system. And he advocated independence for the colonies, largely because he judged trade with the nearby Continent more profitable.

But a lot has happened in the past 200 years, especially in America, and this makes The Wealth of Nations a historical document, not a present help in trouble. Our domestic market is now far larger than any world market Smith could imagine, and the division of labor has gone far beyond the 18 operations in the manufacture of pins that he immortalized. More important, his merchant adventurers have been succeeded by our multinational conglomerates.

Today’s problem with foreign trade is that our industries are losing out to foreign competition or are being shipped abroad by the multinationals. This happens because foreign labor is cheaper than ours. We are told by the three Harvard Business School authors of Industrial Renaissance: Producing a Competitive Future for America that the members of the United Automobile Workers had better shape up because they are paid 80 per cent more per hour than their Japanese counterparts, who are, in addition, more productive. The American man in the street reads this and says, “Just what I always suspected. American automobile workers are way overpaid. No wonder we’re having this depression.” The American man in the board room reacts a bit differently. “It’s a healthy thing we’re having this depression,” he says. “Now we’ll be able to get those wage scales back down where they belong.”

I venture to suggest that there is another way of looking at these figures (whose accuracy I will not question at the moment, though I may do so another time). One might as logically conclude that Japanese auto workers are underpaid as that our fellow citizens in Detroit are overpaid. Indeed, on the basis of the history of industrial relations, I’d lay even money that a better case could be made this way than that. When you stop to think of it, the idea that a working stiff anywhere is overpaid is not, on the record, over plausible.

Everyone talks about automobiles, but they’re comparatively well off. Sol C. Chaikin, president of the International Ladies’ Garment Workers Union, points out that 25 years ago imports accounted for 5 per cent of the sales of ladies’ and childrens’ apparel, but it is estimated that this year they will account for over 50 per cent. In the Peoples’ Republic of China, garment workers are paid 16 cents an hour; in the Federal Republic of China, the rate is 57 cents; and in Hong Kong it’s a little over a dollar. Does anyone seriously propose to reduce American wages (which in the garment industry are already low) to these levels? If not, what does the incessant chatter about “productivity” mean?

Fashionable economics tells us we should be delighted to buy cheap textiles from the Orient and should concentrate on selling “information” in return. Information about what? one wonders. Books are not meant, because they happily pirate whatever they want right now. Nor is hi-tech (as we’re learning to call it) meant, because our multinationals are already manufacturing “hardware” there. That leaves “software,” but that’s easy to pirate, too. And if Orientals should perversely take an interest in the data we busily beam at each other, they can pick up all they want off a satellite, with a disk they can make cheaply.

We’d better face it: until the world standard of living is brought up to ours, there is nothing whatever that cannot be manufactured less expensively abroad than here. Nothing whatever. How long will it take for the world standard to approach ours? If you’re old enough to read this, you’re too old to live to see the day. The question is, what do we want to do about it now?

There’s no doubt what the National Association of Manufacturers wants to do about it, or the Business Roundtable, or the Reagan Administration. They want to lower labor costs every way they can think of: cut wages, cut fringe benefits, cut safety regulations; and to keep those who still have jobs in line, cut unemployment insurance and welfare generally.

Let’s assume, however, that you and I don’t find labor-baiting attractive. Let’s assume we think it a good thing that the American standard of living is higher than the Japanese or the Taiwanese. If we make these assumptions, how can we protect our standard?

Well, the way to protect is to protect. First, we decide that certain of our important industries are threatened in our home market by severe competition from foreign industries. Second, we determine whether that threat is made possible by wages or conditions that we would consider exploitative. Third, we refuse entry to goods produced in grossly exploitative conditions.

The proposal is not complicated. It does not cover all industry but only the industries we declare to be important and threatened in our home market. It does not require elaborate cost accounting (as do the reciprocal trade provisions against “dumping”) but simply straightforward questions of fact: What are the wage scales? What are the working conditions? Is child labor employed? It does not interfere with foreigners’ or multinationals’ trade anywhere else in the world. In every respect the proposal is analogous to our present laws refusing entry to contaminated foods or dangerous drugs or unsafe automobiles. Those laws protect Americans as consumers; the proposed law would protect us as workers and, incidentally, as entrepreneurs.

IT WILL be objected that the proposal can’t work because it is impossible to compare foreign wage scales and working conditions with ours. In reply, I would enquire how, if the comparisons can’t be made, the noisy critics of the American workingman know he is overpaid. What is proposed is merely the reverse of the critics’ coin. The fact of the discrepancy in wages is accepted; but instead of saying that our fellow citizen Americans are overpaid, we say that our fellow-human Orientals are underpaid. Mathematically, there is no difference in what is said; morally, there is an astronomical difference.

Of course the comparisons can be made, and they will be invidious. The real question is, as the lawyers say, who should have the burden of proof? I am reminded of Thaddeus Stevens‘ reaction to proposals that the North tell the South eliminating slavery was not its war aim. “Ask those who made the war what is its object,” Thad growled. In the present case, I think we could reasonably ask those who want access to our markets to prove that their workers are fairly paid and fairly treated by our standards. American unions and American companies would have the right to challenge the proof. No need to make a big fuss about it, any more than a big fuss is now made about determining that certain foreign automobiles don’t meet our emissions standards or that certain drugs are impermissible.

No doubt many will argue against protecting the American standard of living. Two arguments stand out. The first purports to be consumer oriented. Cheap imports, it says, benefit everybody. But they don’t benefit those millions whose jobs are taken by the imports, and those other millions who are being forced back to the poverty level.

The second argument purports to be producer oriented. Restrictions on international trade, it says, threaten all our industries, because exports now represent our margin of profit. To this argument there are three answers: (1) Our really threatened industries-automobiles,

steel, textiles, etc.-have already lost their export markets; (2) our biggest export business-agriculture will continue because the world needs it; and (3) we have at home an unexplored market larger than any we might lose.

Our 14 million unemployed, plus the millions of working poor, plus their dependents, comprise a “nation” of up to 50 million people-bigger than all but a handful of the 157 members of the UN. In spite of our failures, these people are better educated than the rest of the world, have a better understanding of the work ethic, and are closer to the rest of us in needs and wants. If our national and industrial policies were directed to helping these our fellow citizens, there would be plenty of domestic business to keep U.S. industry fully occupied and highly profitable.

 

The New Leader

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